How Maine redirected millions meant to help poor families with kids

From a piece in the Bangor Daily News by Matthew Stone

Last summer, the Maine Department of Health and Human Services publicly touted plans to use more than $3 million in unspent federal welfare funds in an “innovative” way that would direct more money to services for elderly and disabled Mainers.

The transfer, Health and Human Services Commissioner Mary Mayhew said at the time, represented a “reprioritizing [of] Maine’s welfare system to best serve our neediest elderly and disabled neighbors.”

Rhetoric like this has been common under the administration of Gov. Paul LePage, which has often cast its efforts to change Maine’s social services and public assistance infrastructure in terms of prioritizing elderly and disabled Mainers over the “able-bodied.”

The administration has opposed Medicaid expansion, made the case for increased nursing home funding, and justified food stamp time limits largely on those grounds. Quietly, the state has also accrued a sizable balance — $110 million — in the Temporary Assistance for Needy Families program, or TANF, the federal government’s primary mechanism for delivering cash assistance and work support to low-income families with children.

The federal government allocates $78.1 million to Maine each year to support the state’s assistance program, regardless of whether the state spends it or not.

As the federal funding has continued to come in, Maine has spent progressively less of it over the past four years. That’s because of a 2012 state policy that limited the amount of time people can receive TANF to five years over their lifetime.

Now, as the state starts to spend down its $110 million TANF balance and rework the way it distributes federal welfare funds, documents obtained by the BDN show the state has used at least $7.8 million of this money in ways that run afoul of federal law.

The state was on track to continue that spending pattern this fiscal year, until the BDN began asking questions about it. Afterward, state officials updated public documents to indicate Maine’s spending aligned with federal law, but this served only to raise further questions regarding the reality behind the administration’s rhetoric on spending of public assistance funds.

Children in poverty

After the five-year TANF limit took effect in May 2012 — part of the first two-year state budget signed by LePage — the number of families receiving assistance dropped immediately. By 2016, Maine’s total TANF caseload had fallen more than 60 percent.

At the end of May, the state recorded 5,195 open TANF cases, compared with 13,320 just before the limit took effect. Today, the state’s TANF rolls record almost 8,500 children beneficiaries, compared with more than 22,400 in May 2012.

Even as the economy has begun to recover, statewide poverty rates haven’t improved. Child poverty is still higher than it was before the recession, and extreme poverty among the state’s children — those living in families with incomes at half the federal poverty level — has grown. The newly released 2016 KIDS COUNT rankings on child well-being compiled by the Annie E. Casey Foundation show Maine slipping five places in one year — to 17th from 12th.

Meanwhile, with fewer beneficiaries, the state today pays out far less in TANF benefits than it did before the lifetime limit took effect. It paid just more than $2 million total last month compared with more than $5.5 million in May 2012.

Maine’s $110 million TANF balance at the close of the last state fiscal year in June 2015 was larger than the state’s rainy day fund at the time.

In 2014, as Maine’s TANF balance was still accruing, the state ranked 10th in the nation for the amount of TANF money it had left unspent.

“It is important to stress that no children’s programs are going un- or under-funded,” Maine DHHS spokeswoman Samantha Edwards wrote in an email. “Based on the new reality of TANF — we were initially criticized this winter for letting a balance accrue — we are simply maximizing every eligible federal dollar to support needy Mainers and preserve tax dollars at the same time.”

‘Innovative’ reform and the law

Though the redeployment of unused TANF funds was touted as an “innovative” reform to the state’s welfare system, the administration planned to follow through in a way that would have violated a federal statute.

The statute in question forbids states from taking a pool of funds earmarked for one population (low-income families with kids) and spending it on an entirely different demographic (elderly and disabled residents).

In a federally required document the state posted to its website last fall and filed with the federal government, DHHS laid out its plans: Transfer $7.2 million from the state’s TANF grant to another, less restrictive grant account, the Social Services Block Grant, then spend almost half of the transferred amount on four categories of in-home services for elderly and disabled residents.

States are allowed to transfer up to 10 percent of their TANF funding each year to the Social Services Block Grant. Even though the transferred money loses many of its TANF-related restrictions once the money is moved, federal law states that the transferred money “shall be used only for programs and services to children or their families whose income is less than 200 percent of the income official poverty line” (about $40,000 for a family of three).

The law doesn’t give states wide flexibility to redirect the funding to serve a different population, such as elderly residents.

“Are they using the money for families with children under 200 percent of poverty? And if so, that’s legal. And if not, it’s not,” said Liz Schott, a lawyer and senior fellow at the Center on Budget and Policy Priorities who specializes in assistance programs.

“The statute pretty much says what it means. There’s not a lot of complexity to it,” said David Super, a Georgetown University law professor who specializes in poverty and inequality.

But states’ authority under federal welfare laws is so broad that such spending often goes unchecked and unchallenged by federal regulators, who are given little authority by Congress.

After the BDN asked about the statutory children and families requirement, Maine DHHS revised its required documents to show it has been spending the federal money for allowable purposes.

But the revision doesn’t fully account for how the state has actually been spending the money in question. Plus, the revised documents now contradict multiple public statements by DHHS about its plans for spending TANF funds.

Meals and in-home support

After last August’s announcement about the transfer of TANF funds, DHHS — as required by federal law — outlined its plans for spending Social Services Block Grant funds for this federal fiscal year, which began Oct. 1, 2015. The agency posted the document to its website and submitted it to the federal office that administers the grant.

Of the $7.2 million transferred from TANF to the Social Services Block Grant, the plan was to use roughly $3.3 million to supplement existing contracts the state has with nonprofits that provide in-home services to seniors and residents with disabilities:

— The department added $1.3 million to a state contract held by Catholic Charities Maine to provide “homemaker services” to elderly or disabled adults. Services include household jobs such as laundry and cleaning, so an elderly person can continue living at home.

— About $1.04 million supplemented state funds that pay for consumer-directed home-based care, an in-home support service for seniors and other adults with disabilities. The agency Alpha One holds the state contract for this service.

— The department allocated $894,000 to pay for a different level of in-home care for elderly residents — home-based care. That service, provided by Lewiston-based SeniorsPlus, sometimes includes personal care, such as help with dressing and using the toilet, or adult day care services.

— The department planned a $132,000 supplement for agencies around the state that deliver Meals on Wheels; $99,000 came from funds transferred into the Social Services Block Grant from TANF.

‘Uploaded in error’

When first asked about the $3.3 million in TANF money used for services for elderly and disabled residents, Edwards, the DHHS spokeswoman, said the department followed the requirements of federal law.

She said DHHS reallocated TANF funds no longer dedicated to assistance for low-income families to cover other state programs, including programs aimed at preventing child abuse and neglect. That, in turn, preserved other funding that the state could then spend on Meals on Wheels and other in-home services for elderly and disabled residents.

“SSBG funds were available to address [elder services] wait lists because we had adjusted appropriately and legally services that are allowable under TANF,” Edwards wrote in an email. “That freed up SSBG dollars to be used on the allowable services listed that had wait lists.”

But the documentation DHHS submitted to the federal government detailing its spending plan for the Social Services Block Grant funds doesn’t support that statement. That document, called the Social Services Block Grant intended use plan, shows money from TANF — which is earmarked, by law, for low-income families with children — paying directly for those services for elderly and disabled Mainers.

Later, in response to follow-up questions, Edwards said the spending plan document was uploaded to the DHHS website last fall and submitted to the federal government “in error.” DHHS staff had been following a different version of the document internally, she said.

A revised Social Services Block Grant plan was then posted to the DHHS website, and DHHS said it submitted the altered plan to the federal government — more than nine months into the fiscal year. But the new version conflicts with the DHHS announcement from August.

While that announcement made clear the state’s plans to transfer money from TANF to the Social Services Block Grant, the revised plan includes no transfer from TANF to the Social Services Block Grant. Such a transfer is to be determined, or “TBD,” according to the document.

Yet as recently as March, DHHS reiterated plans to annually transfer about 10 percent of the state’s TANF grant into the Social Services Block Grant, after a legislative committee inquired about the $110 million TANF balance.

The revised Social Services Block Grant plan also leaves out a handful of services included in the original plan, along with their associated funding that had already been allocated — such as the $1.3 million for Catholic Charities Maine.

When that allocation appeared in the original Social Services Block Grant plan prepared by DHHS, Catholic Charities Maine confirmed to the BDN the money was added to its contract.

The contract specified the funding source for those additional funds, according to Judy Katzel, Catholic Charities Maine’s chief communications officer. The source was the Social Services Block Grant.

The homemaker services wait list has dropped from 1,100 people to 300 since DHHS added the funding, said Don Harden, director of elder services.

“Obviously, we were very grateful to have the opportunity to move people into these services,” he said.

The first year

This federal fiscal year would have been the second in which Maine DHHS transferred money from TANF to the Social Services Block Grant, then used the transferred funds on services for elderly and disabled residents.

In the last federal fiscal year (Oct. 1, 2014-Sept. 30, 2015), Maine split its transferred funds between special services for disabled residents ($6.2 million) and home-based services for elderly residents ($1.6 million), according to an expenditure report DHHS filed with the federal Office of Community Services. The state listed no children as recipients of the services, and more than 70 percent of recipients were 60 or older.

Nevertheless, DHHS maintained the 2015 funding went to services that benefited children, per TANF law. Edwards, the DHHS spokeswoman, said the TANF funds transferred into the Social Services Block Grant paid for “Child Welfare programs through the Office of Child and Family Services/Office for Family Independence.”

But the expenditure report doesn’t match that claim. It specifically lists the transferred TANF funds as paying for special services for disabled residents and home-based services.

“The thing about a block grant like SSBG or TANF is, it’s very hard to track a dollar,” said Super, the Georgetown law professor. “But if you jack up the amount going in and you simultaneously jack up the amount going to elder services, obviously, it’s going to purposes inconsistent with the spirit and probably the letter of the statute.”

There are scenarios in which transferred TANF funds could lawfully be spent on services for elderly and disabled residents, but only under certain conditions, according to Schott of the Center on Budget and Policy Priorities.

“For the most part, you could not use these funds for services to the elderly with, perhaps, a narrow exception of a situation where the elderly person resides in a family with children,” said Schott. “It could be an elderly grandparent who is taking care of the minor child or is residing in a three-generation household where there are children as well as the parents of the children.”

But Maine DHHS hasn’t required that service providers receiving supplemental funds impose different eligibility requirements to account for TANF’s rules. Federal regulations wouldn’t even allow that, and service providers say it is difficult to apportion services by funding source.

And under the state rules, service eligibility itself does not depend on income nor on the presence of dependent children in the home.

Elder service providers contacted by the BDN said it’s rare for them to serve homes where minor children live. In addition, they don’t collect such information and report it to the state. It’s also statistically unlikely that a significant portion of households that receive elder services are home to minor children.

Maine is home to a number of households with both grandparents and children under 18, but it’s only about 2.2 percent of all households, according to the 2010 census.

Transferred to kids, parents

Prior to the questionable spending of the past two years, Maine often transferred money from TANF to the Social Services Block Grant, according to federal expenditure records.

Only in the past four years, however, has the state consistently transferred the maximum amount — 10 percent, about $7.8 million — or close to it.

In federal fiscal years 2013 and 2014, Maine used transferred funds to pay for foster care services — a permitted use under federal law because the beneficiaries were children. Those transfers placed Maine well within the national norm.

Across the country, states generally limit their spending of TANF transfer funds to programs that either serve kids directly or their parents.

Oklahoma, for example, uses its full transfer from TANF to pay for child protective services, according to federal records.

“Federal regulations allow the funds to be used for the benefit of children and families … which include activities in child welfare/child protective services,” Sheree Powell, director of communications and community relations for the Oklahoma Department of Human Services, wrote in an email.

In Vermont, officials have transferred funds from TANF to the Social Services Block Grant mostly to pay for child care.

Transferring the funds offers the state some additional flexibility, but Vermont uses the transferred funds largely as an extension of TANF, said Paul Dragon, deputy secretary of the Vermont Agency of Human Services.

“With a block grant, we’re well within the rules to transfer that money as long as it goes toward one of the TANF purposes,” he said.

Little oversight

Twice a year, states report information on the Social Services Block Grant to the federal government — once before the fiscal year has begun to indicate how they plan to spend their allocation and once after the fiscal year has ended to show how they actually spent the money.

“We have limited authority under the block grant to monitor, but we do review the post-expenditure report,” said Jeannie Chaffin, director of the Office of Community Services. “We have a data review process, and we do look at the post-expenditure reports as they come in.”

The federal government relies on each state’s auditing process to flag suspect expenditures, Chaffin said. How each state spends the money it transfers from TANF to the Social Services Block Grant, she said, “is one of the items that [the state auditor] should be testing.”

Staff at the Maine State Auditor’s office examine that expenditure, but the last period they examined was federal fiscal year 2014, when Maine spent its transferred TANF funds on foster care, said State Auditor Pola Buckley. Auditing staff consulted with federal officials and found that to be an acceptable use of the funds, she said.

Officials from the federal Office of Family Assistance, which administers TANF, and the Office of Community Services would not comment on whether Maine’s expenditures adhered to federal law. But after the BDN asked them about the expenditures, federal officials asked Maine DHHS for information about the TANF transfer and associated expenditures to test the state’s compliance, according to a spokeswoman for the federal offices.

The state could be subject to penalties if it’s found to have misused federal funds. Under TANF law, the penalty would amount to the sum of misused funds plus additional amounts if the misuse is intentional.

But penalties through the Social Services Block Grant seem improbable. The grant is among the most permissive and loosely regulated federal block grants, according to Super.

With “SSBG, the requirements are so loose that I think many people assume that whatever the state wanted to do, it would just put it in its document and do it,” he said. “With the very limited exceptions that we’ve been discussing, an awful lot of things are legal.”

As a result, he said, little federal effort is put into auditing spending under the block grant.

Maine DHHS hasn’t indicated its Social Services Block Grant spending plans, much less its plans for the portion of TANF transferred into the grant, for the upcoming fiscal year that starts Oct. 1.

Asked for those details, Edwards said, “The Department will continue to deploy TANF and SSBG funds for eligible purposes to maximize federal resources and preserve state funds.”